Petia Topalova

Trade Liberalization and Firm Productivity: The Case of India

This paper exploits Indias rapid, comprehensive, and externally imposed trade reform to establish a causal link between changes in tariffs and firm productivity. Pro-competitive forces, resulting from lower tariffs on final goods, as well as access to better inputs, due to lower input tariffs, both appear to have increased firm-level productivity, with input tariffs having a larger impact. The effect was strongest in import-competing industries and industries not subject to excessive domestic regulation. While we find no evidence of a differential impact according to state-level characteristics, we observe complementarities between trade liberalization and additional industrial policy reforms.

Multi-product Firms and Product Turnover in the Developing World: Evidence from India

This paper provides evidence on the patterns of multiproduct firm production in a large developing country, India, during a period that spans market reforms. In the cross-section, multiproduct firms in India look remarkably similar to their U.S. counterparts. The time-series patterns, however, exhibit important differences. In contrast to evidence from the United States, product churning, particularly product rationalization, is far less common in India. We find no link between product rationalization and output tariff declines following Indias 1991 trade liberalization. The lack of creative destruction is consistent with the role of industrial regulation in preventing an efficient allocation of resources.

Capital Flows are Fickle: Anytime, Anywhere

Has the unprecedented financial globalization of recent years changed the behavior of capital flows across countries? Using a newly constructed database of gross and net capital flows since 1980 for a sample of nearly 150 countries, this paper finds that private capital flows are typically volatile for all countries, advanced or emerging, across all points in time. This holds true across most types of flows, including bank, portfolio debt, and equity flows. Advanced economies enjoy a greater substitutability between types of inflows, and complementarity between gross inflows and outflows, than do emerging markets, which reduces the volatility of their total net inflows despite higher volatility of the components. Capital flows also exhibit low persistence, across all economies and across most types of flows. Inflows tend to rise temporarily when global financing conditions are relatively easy. These findings suggest that fickle capital flows are an unavoidable fact of life to which policymakers across all countries need to continue to manage and adapt.

India : Is the Rising Tide Lifting All Boats?

While many have celebrated Indias accelerating economic growth, some have expressed concern about the distributional impacts of the growth process. Cognizant of the vulnerability of its large population below poverty, Indias authorities have made faster and more inclusive economic growth the primary goal of their development strategy. This paper aims to document how the benefits of economic expansion were shared across the income distribution over the last two decades using disaggregate household level data. Experiences across Indian states suggest an important role for economic policy in shaping the inclusiveness of growth. States with higher financial development, more flexible labor markets, and higher average education experienced greater relative gains for the poor. Improving infrastructure may also lead to a growth process that is more inclusive of the poor.

Poverty and Crime: Evidence from Rainfall and Trade Shocks in India

Does poverty lead to crime? We shed light on this question using two independent and exogenous shocks to household income in rural India: the dramatic reduction in import tariffs in the early 1990s and rainfall variations. We find that trade shocks, previously shown to raise relative poverty, also increased the incidence of violent crimes and property crimes. The relationship between trade shocks and crime is similar to the observed relationship between rainfall shocks and crime. Our results thus identify a causal effect of poverty on crime. They also lend credence to a large literature on the effects of weather shocks on crime and conflict, which has usually assumed that the income channel is the most relevant one.

Child Labor and Schooling in A Globalizing World: Some Evidence from Urban India

Trade influences child time allocation in developing countries through its effects on the returns to education, labor demand, and poverty. We examine how Indias dramatic 1991 trade liberalization influenced child labor and schooling in urban areas of India that differ in the extent to which employment lost tariff protection. In general, urban India experienced large increases in schooling and decreases in child labor over the 1990s. We find that these improvements are attenuated in Indian cities where employment experienced larger reductions in tariff protection. Girls are particularly affected. We argue that the observed changes in child time allocation are consistent with differential declines in poverty across regions, but changes in the economic opportunities of children might also play a role in our findings. (JEL: F15, F16) (c) 2009 by the European Economic Association.

What Level of Public Debt Could India Target

This paper discusses possible medium-term public debt targets for India, based on evidence from the economic literature on prudent levels of public debt and the feasibility for the country to meet a particular target over the next 5-6 years. While recognizing the challenges in determining an appropriate debt target, cross-country analysis and simulations suggest that a debt ratio in the range of 60-65 percent of GDP by 2015/16 might be suitable for India. Such a debt ceiling, while still above the average debt level for emerging markets, is within the range of debt ratios that would provide room for countercyclical fiscal policy and contingent liabilities. It would also send a strong signal of the governments commitment to fiscal consolidation by making a clear break with the past.

India’s Experience with Fiscal Rules; An Evaluation and The Way Forward

This paper examines Indias experience with fiscal rules with a view to inform the design of a possible successor fiscal framework to the FRBMA. Among several proposals to strengthen the FRBMA, a framework that focuses medium-term fiscal policy on debt sustainability by the use of a medium term debt target, and annual nominal expenditure growth rules is proposed. This approach tackles the deficit bias at its core and enables countercyclical fiscal policy through automatic stabilizers. Numerical targets should be supported by structural reform measures for both revenues and expenditures, while the coverage of the fiscal rules should be expanded.

Gender Diversity in Senior Positions and Firm Performance: Evidence from Europe

This paper examines the link between gender diversity in senior corporate positions and financial performance of 2 million companies in Europe. We document a positive association between corporate return on assets and the share of women in senior positions and establish two potential channels through which gender diversity may affect firm performance. The positive correlation is more pronounced in, first, sectors where women form a larger share of the labor force (such as the services sector) and, second, where complementarities in skills and critical thinking are in high demand (such as high-tech and knowledge-intensive sectors).

The Impact of Product Market Reforms on Firm Productivity in Italy

This paper examines the role of removing obstacles to competition in product markets in raising growth and productivity. Using firm-level data from Italy during 2003–13 and OECD measures of product market regulation, we estimate the effect of deregulation in network sectors on value added and productivity of firms in these sectors, as well as firms using these intermediates in their production processes. We find evidence of a significant positive impact. These effects are more pronounced in Italian provinces with more efficient public administration, underscoring the complementarities of advancing public administration and product market reforms simultaneously.